Foreign investors have pulled out nearly Rs 6,000 crore from the Indian debt markets in the first two weeks of October, after pumping in a staggering amount in September. Experts say that recent rate cut by RBI and new governor's dovish stance build downward pressure on bond market.
However, Foreign Portfolio Investors (FPIs) have influxed Rs 180 crore in the stock markets during the period under review.
"The recent rate cut by RBI is one of the factors for the outflow. With downward pressure on bond yields, debt does not seem attractive," SAS Online Chief Operating Officer (COO) Siddhant Jain said. "Besides, new RBI Governor's dovish stance and flexibilityto cut rates further if needed has helped in the outflow," he added.
Reserve Bank, on October 4, cut policy rate by 0.25 percent to 6.25 per cent, a 6-year low.
According to depositors' data, net withdrawal by FPIs stood at Rs 5,946 crore from the debt markets during October3-14. The outflow comes following a net inflow of Rs 9,789 crore in the preceding month (September). The low investment in equities could be attributed to a below-forecast reading on Chinese data that raised fresh concerns about economy and Fed Reserve's September meeting minutes which boosted the case for higher US interest rates this year, according to brokers.
So far this year, FPIs have pulled out a net sum of Rs3,504 crore from the debt markets, while they have pumped inRs 51,473 crore in equities, resulting in a net inflow of Rs47,968 crore.